Saw this post on another Ihub board
el jefe Share Friday, June 03, 2011 4:42:50 PM
Re: shaner post# 518 Post # of 4396
MARKET MAKER SIGNALS
Good question, and a fairly easy one to explain here. To understand this however, we must first understand what a MM (market maker) is.
A MM is a broker-dealer that buys blocks of a security, so that they can quote the bid/ask prices and sell them to US. They also trade between broker-dealer if need be. But in general, they buy and sell to and from us.
Side Note:
There's many market makers out there, the bigger ones you see regularly are AUTO, NITE, ETMM, and these guys mostly service the retail broker (etrade, ameritrade, etc.) You will see other big ones and complete randoms show up sometimes. So, if lets say AUTO has bids lined up a .005 and on ask side .0055 then he's making money on the spread between the two when the trade is complete.
So, back to the question. These are the common Market Maker Signals below, signaled by either a BUY or a SELL of "X" shares. Sometimes you ask yourself "why would someone spend $10 trading fee to trade 100 shares of xyz at .005 for $.50 minus trading fee??? They don't (unless they're stupid). Market Makers signal, and it doesn't cost them anything:
MM SIGNALS:
100= I need shares.
200= I need shares badly,but do not take the stock down.
300= Take the price down so I can load shares
400= Keep trading it sideways.
500= Gap the stock. This gap can be either up or down, depending on the direction of the 500 signal.
As far as the 911 signals. I personally have never seen or heard of a situation where a market maker has done this. It is generally an individual trying to spook people into selling because they either: are shorting the stock, or, trying to knock it down so they can pick up cheaper shares on the bid.
Todays volume was 200. Could it mean someone wants to accumulate shares?
